Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Please help with the Balance in the Investment in Sword Account, Thanks. Prince Corporation holds 75 percent of the common stock of Sword Distributors Inc.,

image text in transcribed

image text in transcribed

Please help with the Balance in the Investment in Sword Account, Thanks.

Prince Corporation holds 75 percent of the common stock of Sword Distributors Inc., purchased on December 31,201, for $2,160,000. At the date of acquisition, Sword reported common stock with a par value of $930,000, additional pald-in capital of $1,280,000, and retained earnings of $550,000. The falr value of the noncontrolling interest at acquisition was $720,000. The differential at acquisition was attributable to the following items: During 202, Prince sold a plot of land that it had purchased several years before to Sword at a gain of $16,800; Sword continues to hold the land. In 206, Prince and Sword entered Into a five-year contract under which Prince provides management consulting services to Sword on a continuing basis; Sword pays Prince a fixed fee of $93,000 per year for these services. At December 31,208, Sword owed Prince $23,250 as the final 208 quarterly payment under the contract. On January 2, 20x8, Prince paid $260,000 to Sword to purchase equipment that Sword was then carrylng at $300,000. Sword had purchased that equipment on December 27,202, for $450,000. The equipment Is expected to have a total 15 -year life and no salvage value. The amount of the differentlal assigned to goodwill has not been Impalred. At December 31,208, trial balances for Prince and Sword appeared as follows: As of December 31,208, Sword had declared but not yet pald its fourth-quarter dividend of $5,000. Both companles use straight-line depreciation and amortization. Prince uses the fully adjusted equity method to account for its Investment in Sword. b. Verlfy the balance In Prince's Investment In Sword Distributors account as of December 31,208. Prince Corporation holds 75 percent of the common stock of Sword Distributors Inc., purchased on December 31,201, for $2,160,000. At the date of acquisition, Sword reported common stock with a par value of $930,000, additional pald-in capital of $1,280,000, and retained earnings of $550,000. The falr value of the noncontrolling interest at acquisition was $720,000. The differential at acquisition was attributable to the following items: During 202, Prince sold a plot of land that it had purchased several years before to Sword at a gain of $16,800; Sword continues to hold the land. In 206, Prince and Sword entered Into a five-year contract under which Prince provides management consulting services to Sword on a continuing basis; Sword pays Prince a fixed fee of $93,000 per year for these services. At December 31,208, Sword owed Prince $23,250 as the final 208 quarterly payment under the contract. On January 2, 20x8, Prince paid $260,000 to Sword to purchase equipment that Sword was then carrylng at $300,000. Sword had purchased that equipment on December 27,202, for $450,000. The equipment Is expected to have a total 15 -year life and no salvage value. The amount of the differentlal assigned to goodwill has not been Impalred. At December 31,208, trial balances for Prince and Sword appeared as follows: As of December 31,208, Sword had declared but not yet pald its fourth-quarter dividend of $5,000. Both companles use straight-line depreciation and amortization. Prince uses the fully adjusted equity method to account for its Investment in Sword. b. Verlfy the balance In Prince's Investment In Sword Distributors account as of December 31,208

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Quality Assessment Manual For The Internal Audit Activity

Authors: The Internal Audit Foundation

2017 Edition

0894139975, 978-0894139970

More Books

Students also viewed these Accounting questions